Bill S4310A-2013

Makes a reduced rate of interest applicable to certain additions of tax resulting from discovery after filing an estate tax return of certain assets

Makes a reduced rate of interest applicable to certain additions of tax resulting from discovery after filing an estate tax return of certain assets belonging to the decedent held by the state comptroller as abandoned property.

Details

Actions

  • Jun 20, 2013: SUBSTITUTED BY A5960A
  • Jun 20, 2013: ORDERED TO THIRD READING CAL.1481
  • Jun 20, 2013: COMMITTEE DISCHARGED AND COMMITTED TO RULES
  • Jun 14, 2013: PRINT NUMBER 4310A
  • Jun 14, 2013: AMEND AND RECOMMIT TO INVESTIGATIONS AND GOVERNMENT OPERATIONS
  • Mar 20, 2013: REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS

Memo

BILL NUMBER:S4310A

TITLE OF BILL: An act to amend the tax law, in relation to making a reduced rate of interest applicable to certain additions to tax resulting from an executor's discovery after the date for filing an estate tax return of certain assets belonging to the decedent held by the state comptroller as abandoned property; and to amend chapter 389 of the laws of 1997 amending the tax law and other laws relating to the estate and gift tax, and chapter 190 of the laws of 1990 amending the tax law relating to certain taxes, fees, and other impositions, in relation to rates of interest for certain estates

PURPOSE:

The bill would preclude the charging of interest on estate tax liabilities attributable to late-discovered assets in the possession of the State Comptroller as abandoned property for any period of time during which the State Comptroller did not pay interest on the property.

SUMMARY OF PROVISIONS:

Section 1 of the bill would add new section 991 to the Tax Law, which relates to additional estate tax owed by an estate that is attributable to an executor's discovery, after the date for the filing of an estate tax return, of the existence of an estate asset in the possession of the State Comptroller as abandoned property. The new section would require the Commissioner of Taxation and Finance to not charge interest on such additions to estate tax for any period in which the State Comptroller did not pay interest on the asset if, at the time the estate's estate tax return was required to be filed, including any extensions, the asset was not yet included in the public records of abandoned property maintained by the State Comptroller.

Sections 2 and 3 of the bill would apply the same limitation on accrual of interest as set forth in section 1 to estates of decedents dying when prior versions of the New York estate tax were in effect. Thus, section 2 applies that interest limitation to estates of decedents dying after March 31, 1963 and before February 1, 2000, during which period an earlier version of Article 26's estate tax was in effect (which was repealed by Chapter 389 of the Laws of 1997).

Section 3 would apply the limitation to estates of decedents dying on or after June 1, 1944, the date on which the State Comptroller was first required to maintain public lists of abandoned property, and before April 1, 1963, during which .period former Article 10-C's estate tax was in effect, prior to its being superseded by former Article 26, pursuant to Chapter 1013 of the Laws of 1962.

Section 4 would make this bill effective immediately but applicable to estates of decedents dying on or after June 1, 1944, the date on which the State Comptroller was required to maintain public records of abandoned property. Section 4 also would provide that no refunds or credits would be granted as a result of this act.

EXISTING LAW:

The discovery of assets after the date prescribed for paying the estate tax, including property in the possession of the State Comptroller as abandoned property, can create an additional estate tax liability, either by increasing the tax due from an estate that already filed an estate tax return or by putting a non-filing estate over the threshold size that triggers the duty to pay estate tax. Under all of these articles, interest is required to be charged if the tax is late-paid (Tax Law § 990-b 9, incorporating by reference Tax Law 5 683-c applicable to current article 26 and former article-26 for estates of decedents dying on or after May 25, 1990; former Tax Law 249-z applicable to estates of decedents dying on or after September 1, 1930 and before May 25, 1990). Executors and heirs holding estate property can be held liable for estate tax long after the due date of any estate tax return. For example, in regard to estates of decedents dying on or after May 25, 1990, there is no statute of limitations for imposing additional estate tax if the estate did not file a return (Tax Law § 990, incorporating by reference Tax Law § 684). In relation to estates of decedents dying on or after September 1, 1930 and before May 25, 1990, former Tax Law section 249-x applied, which allowed additional estate tax to be determined at any time based on unreported assets (former Tax Law § 962b incorporating former Tax Law § 249-z). Moreover, the Tax Department continues to have collection authority under these present and former estate tax articles in eases of late-discovered assets, as an estate tax lien attaches to estate property for specified periods (e.g., Tax Law § 982-a fifteen year lien; former Tax Law § 249-bb indefinite lien unless certain conditions are met).

The Abandoned Property Law (APL) requires many entities, such as banks, brokers, arid utilities, and the court system, to turn over to the State Comptroller certain types of customer property held by them after the passage of a specified period of inactivity. Since 1944, the State Comptroller has been required to maintain public records ,regarding abandoned property that has been paid over to it (APL 1401). Prior to the enactment of Chapter 936 of the Laws of 1977, the State Comptroller was not authorized to pay interest on abandoned property. As amended by chapter 936, effective June 1, 1977, the APL requires the State Comptroller to pay interest on certain types of abandoned property, but only for the first five years the property is in its possession, after which the State Comptroller ceases to pay interest (APL § 1405).

JUSTIFICATION:

It is often difficult for an executor of an estate to discover all the assets of the decedent within the time allotted for filing the estate's New York State estate tax return, which, under the current estate tax, is nine months from the decedent's date of death (15 months if an extension is received). One difficulty is that fiduciaries holding assets not discovered by-the executor cannot treat such assets as abandoned property to be turned over to the State Comptroller until a statutorily set period of inactivity has expired, which is often long after the estate's estate tax return is due. For example, the period of activity with regard to bank accounts is three years (APL § 300). Despite the passage of time, the late discovery of an asset may trigger an estate tax liability if the estate tax statute of limitations has not expired (e.g., the estate had not filed a

return, in which case there is no limitations period on assessment under the current estate tax). The Tax Department is required to charge interest from the due date of the estate tax return that should have included the asset until such time as the tax is maid.

While the interest charged to the estate can be sizable, under APL section 1405, the State Comptroller only pays interest on certain categories of abandoned property and even then it only accrues interest for the first five years that the property was in that office's possession.

Prior to that section's amendment in 1977, the State Comptroller did not pay interest on any abandoned property.

In recent years, the State Comptroller has made efforts to encourage people to search its records of abandoned property, now available as searchable web-based databases. As a result, many people have been able to find abandoned property formerly belonging to deceased persons of whom they are heirs. The problem is that the newly discovered estate asset often triggers an estate tax liability that the heir must pay because the estate tax lien has not expired. The interest on the estate tax liability generated by the late-discovered abandoned property is sometimes as much as five to ten times the tax owed, while the State has often paid little or no interest on the property.

This proposal would mitigate this inequity by directing the Tax Department not to charge interest on any additional estate tax liability owed by an estate based on the late-discovered asset for periods in which the State Comptroller did not pay interest on that asset. This provision would not apply if the asset was listed as abandoned property in the public records of the State Comptroller prior to the due date, with extensions, of the estate's estate tax return and thus could have been discovered with due diligence by the estate's executor.

Under section 4 of the bill, no refunds or credits will be maid as a result of this bill.

LEGISLATIVE HISTORY:

New Bill.

FISCAL IMPLICATIONS:

This proposal will result in a revenue loss of up to $400,000 annually beginning in SFY13-14.

EFFECTIVE DATE:

The bill would take effect immediately and apply to estates of decedents dying on or after June 1, 1944.


Text

STATE OF NEW YORK ________________________________________________________________________ 4310--A 2013-2014 Regular Sessions IN SENATE March 20, 2013 ___________
Introduced by Sen. MARCELLINO -- read twice and ordered printed, and when printed to be committed to the Committee on Investigations and Government Operations -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT to amend the tax law, in relation to making a reduced rate of interest applicable to certain additions to tax resulting from an executor's discovery after the date for filing an estate tax return of certain assets belonging to the decedent held by the state comptroller as abandoned property; and to amend chapter 389 of the laws of 1997 amending the tax law and other laws relating to the estate and gift tax, and chapter 190 of the laws of 1990 amending the tax law relating to certain taxes, fees, and other impositions, in relation to rates of interest for certain estates THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The tax law is amended by adding a new section 991 to read as follows: S 991. INTEREST ACCRUAL RELIEF FOR ADDITIONAL TAX ATTRIBUTABLE TO NEWLY-DISCOVERED ABANDONED PROPERTY. NOTWITHSTANDING ANY OTHER PROVISION OF LAW, IN COMPUTING THE INTEREST DUE ON AN ADDITION TO TAX OWED BY AN ESTATE ATTRIBUTABLE TO THE INCLUSION IN THE ESTATE'S FEDERAL GROSS ESTATE OF AN ASSET HELD BY THE COMPTROLLER AS ABANDONED PROPERTY, THE COMMISSIONER SHALL APPLY THE INTEREST RATE USED BY THE COMPTROLLER, PURSUANT TO SECTION FOURTEEN HUNDRED FIVE OF THE ABANDONED PROPERTY LAW, IN COMPUTING THE INTEREST DUE ON SUCH ABANDONED PROPERTY WHILE IN THE COMPTROLLER'S POSSESSION (INCLUDING A ZERO RATE IF THE COMPTROLLER DID NOT PAY INTEREST ON SUCH PROPERTY) IF, AS OF THE DATE PRESCRIBED FOR THE FILING OF A RETURN REQUIRED BY THIS ARTICLE, INCLUDING ANY EXTENSIONS GRANTED FOR FILING, INFORMATION PERTAINING TO THE ASSET HAD NOT YET APPEARED IN THE PUBLIC RECORDS OF ABANDONED PROPERTY REQUIRED TO BE MAINTAINED BY THE COMPTROLLER PURSUANT TO SECTION FOURTEEN HUNDRED ONE OF THE ABANDONED PROPERTY LAW.
S 2. Section 35 of part A of chapter 389 of the laws of 1997 amending the tax law and other laws relating to the estate and gift tax, is amended to read as follows: S 35. All provisions of law repealed or deleted by sections one through thirty-four of this act, and of the regulations adopted there- under, in respect to the assessment, payment, determination, collection and refund of taxes or other impositions imposed thereunder, the filing of returns and preservation of records for the purposes of such taxes or impositions, the secrecy of returns, and the disposition of revenues shall continue in effect with respect to all such taxes or impositions accrued up to the effective date of this section[.]; PROVIDED, HOWEVER, THAT, IN COMPUTING THE INTEREST DUE ON AN ADDITION TO TAX OWED BY AN ESTATE ATTRIBUTABLE TO THE INCLUSION IN THE ESTATE'S GROSS ESTATE OF AN ASSET HELD BY THE STATE COMPTROLLER AS ABANDONED PROPERTY, THE COMMIS- SIONER OF TAXATION AND FINANCE SHALL APPLY THE INTEREST RATE USED BY THE COMPTROLLER, PURSUANT TO SECTION 1405 OF THE ABANDONED PROPERTY LAW, IN COMPUTING THE INTEREST DUE ON SUCH ABANDONED PROPERTY WHILE IN THE COMP- TROLLER'S POSSESSION (INCLUDING A ZERO RATE IF THE COMPTROLLER DID NOT PAY INTEREST ON SUCH PROPERTY) IF, AS OF THE DATE PRESCRIBED FOR THE FILING OF A RETURN, INCLUDING ANY EXTENSIONS GRANTED FOR FILING, INFOR- MATION PERTAINING TO THE ASSET HAD NOT YET APPEARED IN THE PUBLIC RECORDS OF ABANDONED PROPERTY REQUIRED TO BE MAINTAINED BY THE STATE COMPTROLLER PURSUANT TO SECTION 1401 OF THE ABANDONED PROPERTY LAW. S 3. Paragraph 1 of subdivision (i) of section 385 of chapter 190 of the laws of 1990 amending the tax law relating to certain taxes, fees, and other impositions, as amended by section 71 of part A of chapter 56 of the laws of 1998, is amended to read as follows: (1) All provisions of articles 10-A, 10-B, 10-C and section 962 of the tax law (as repealed by section one hundred eight of this act) in respect to the imposition, rates, appraisal and valuation of estates, filing of tax, assessment, determination, payment, collection and refund of the taxes imposed or administered thereunder, the filing of reports and returns, the final federal determinations, imposition of interest and penalties, the jurisdiction of surrogates' courts, provisions relat- ing to appeals and the disposition of revenues and fees shall continue in effect with respect to all such taxes accrued on or before the effec- tive date of this act, except that (A) section 249-u of the tax law shall not be applicable after the effective date of this act, (B) with respect to any of the provisions of article 10-C thereof relating to an appraiser, the appraiser shall be the commissioner of taxation and finance or his designee on and after such date, and (C) the fee for a release of lien imposed by subdivision c of section 249-bb, which was applicable to estates of decedents subject to tax under article 26 of the tax law by reason of section 962 thereof, shall not be applicable; PROVIDED THAT, WITH REGARD TO AN ADDITION TO TAX OWED BY AN ESTATE ATTRIBUTABLE TO THE INCLUSION IN THE ESTATE'S FEDERAL GROSS ESTATE OF AN ASSET HELD BY THE STATE COMPTROLLER AS ABANDONED PROPERTY, NO INTEREST SHALL ACCRUE FOR ANY PERIOD OF TIME IN WHICH THE STATE COMPTROLLER DID NOT PAY INTEREST ON THE ASSET IF, AS OF THE DATE PRESCRIBED FOR THE FILING OF A RETURN, INCLUDING ANY EXTENSIONS GRANTED FOR FILING, INFOR- MATION PERTAINING TO THE ASSET HAD NOT YET APPEARED IN THE PUBLIC RECORDS OF ABANDONED PROPERTY REQUIRED TO BE MAINTAINED BY THE STATE COMPTROLLER PURSUANT TO SECTION 1401 OF THE ABANDONED PROPERTY LAW; S 4. This act shall take effect immediately and shall apply to estates of decedents dying on or after June 1, 1944, provided that no refunds or credit shall be granted as a result of any provision of this act.

Comments

Open Legislation comments facilitate discussion of New York State legislation. All comments are subject to moderation. Comments deemed off-topic, commercial, campaign-related, self-promotional; or that contain profanity or hate speech; or that link to sites outside of the nysenate.gov domain are not permitted, and will not be published. Comment moderation is generally performed Monday through Friday.

By contributing or voting you agree to the Terms of Participation and verify you are over 13.

Discuss!

blog comments powered by Disqus